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With the Indian economy booming, smaller cities are going to drive realty growth,Improving infrastructure, urban governance, rapid influx of knowledge industry professionals, improving quality of life and rising prosperity would lead to the development of smaller cities such as Surat, Chandigarh and Nagpur, according to the report brought out jointly by the Federation of Indian Chambers of Commerce and Industry (FICCI) and Ernst & Young, cities that have tremendous growth potential are Vadodara, Visakhapatnam, Jaipur, Thiruvananthapuram, Kochi, Nashik, Indore and Ludhiana.
"The real estate sector is witnessing exponential growth and attracting immense interest from developers, consumers and investors in India and abroad," said Ganesh Raj, partner and national leader (real estate practice), Ernst & Young.Demand for commercial office space, unexplored resources and low labour cost is driving investors towards smaller cities and towns, the report noted. "India's Planning Commission has estimated that investment in infrastructure - defined broadly to include road, rail, air and water transport, electricity, telecommunications, water supply and irrigation - would need to increase from 4.6 percent of GDP to between 7-8 percent during the Eleventh Plan period (2007-2012), which would entail an outlay of almost $320 billion over the plan period," Mitra added.
These cities have been rated as B++ in the E&Y India City rating. Delhi and Mumbai rank first and second respectively with A++ ratings, followed by Bangalore, Chennai, Hyderabad, Kolkatta (with A+ rating) and Pune and Ahmedabad (A).
The realty sector in India is growing by more than 30 per cent per annum and this order of growth is shifting the focus of investors and developers to relatively smaller cities and hence there is a likelihood of such emerging cities leading the transformation of the real estate sector, the study says.
The ratings are based on five critical indices, city prosperity, urban governance, business environment, quality of life and infrastructure, encompassing 55 parameters.The assessment of potential in different cities across India would assist the government, industry, developers and investors to systematically plan the inflow of investments and the development of cities, he added.The report, which will be released on September 27 at FICCI's International Real Estate summit to be held in Mumbai, also found out that education, healthcare and medicities are the new avenues that are available for developers, Raj said.
FICCI-E&Y report also carries a survey from leading investors, which revealed that all the respondents believe that more than $5 billion would be deployed into Indian real estate over the next three years with around 20 per cent believing that the deployment would be more than $20 billion.
Almost 80 per cent of the respondents believe that in short to mid term, India as an investment destination is 'excellent' or 'very good' compared to other Asian markets like China, Vietnam, Malaysia, Indonesia and Thailand.According to the survey, more than 50 per cent of respondents believe that high trajectory growth would continue for next 2-3 years.
Highlighting the growth of Indian real estate sector, FICCI Secretary General Amit Mitra said, "We are going to see a major development in the future where housing industry defines the flip-flop of growth and expansion as in the US. We are moving in that direction."
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